JAKARTA, Aug 21 (Reuters) - Indonesia's highest court is widely expected on Thursday to uphold last month's hotly contested presidential election, paving the way for Joko Widodo to take over as leader of the world's third largest democracy.

Losing candidate Prabowo Subianto has asked the Constitutional Court to overturn the election result, saying the vote was tainted by mass fraud. The verdict, expected at around 2 p.m. (0700 GMT), cannot be appealed.

The case is widely seen as a face-saving gesture and has been a common course of action in previous elections. The court has never overturned the result of a presidential election.

Uncertainty over the election has delayed at least one major economic reform policy, as the outgoing government awaits the verdict before launching talks with Widodo's transition team on how to address ballooning fuel subsidy costs.

Around 50,000 police and military personnel are on standby around the capital city in case of violence, authorities said. Some businesses and schools will close early as a precaution.

Political rallies in Jakarta have remained peaceful since the hearing began two weeks ago.

The Elections Commission (KPU), which has been commended by international observers for its transparency, declared Widodo the winner by nearly 8.5 million votes, or more than 53 percent of the vote.

Prabowo's lawyers said there were mistakes at 52,000 polling stations and that the former general had actually won the election by around 1 million votes.

The case is seen as a major test for the Constitutional Court after the former chief justice was jailed for life in June for accepting bribes over local election disputes. Analysts say the court is keen to regain its reputation for independence.

If the court decides to uphold the election, Widodo will be able to speed up his preparations ahead of taking office on Oct. 20. He is expected to soon resign as Jakarta governor to focus on the transition.

A senior member of Widodo's transition team told Reuters, "We will be more open in discussing with the current government a possibility of raising fuel prices (before October)." (Reporting by Kanupriya Kapoor and Fransiska Nangoy; Writing by Randy Fabi; Editing by Jeremy Laurence)